Dollar Stabilizes Ahead of US CPI Report

The US dollar has stabilized at lower levels ahead of the release of the latest US CPI report for July. The dollar index has been trading just below the 100.00-level since the sell-off at the end of last week triggered by the much weaker nonfarm payrolls report for July.

Market participants are waiting to see if today's US CPI report will further dampen expectations for a Fed rate hike as soon as September. The US rate market is currently pricing in around a 50:50 probability of a Fed hike in September, down from the initial expectation of a 25bps hike before the July FOMC meeting.

The recent scaling back of Fed rate hike expectations has contributed to the 2-year US Treasury bond yield falling back around 15bps from the high of 4.37% on 23rd July.

Market participants will be closely scrutinizing today's US CPI report for July to see if there is further evidence of disinflation pressures after the June CPI revealed muted underlying inflation pressures.